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'Democracy and Inequality' Academic Panel

GRETCHEN RITTER: Hello, everyone. I am Gretchen Ritter, the Harold Tanner Dean of the College of Arts and Sciences. And it's my pleasure to welcome you all here to our last official Ithaca event of the Presidential Inauguration for Cornell's 13th President, Elizabeth Garrett.
[APPLAUSE]
Our topic today is Democracy and Inequality. There has been much discussion lately over the growth in economic inequality, both in the United States and elsewhere around the globe. While many observers debate the causes and meaning of economic inequality, we are here today to consider what impact, if any, inequality has on democracy.
I would propose that for democratic communities to be healthy and vibrant, they need to have shared values that bind them together. In the United States, those values have traditionally included beliefs in opportunity and in fairness. What impact does inequality have on those shared beliefs? If a large section of our community no longer sees social opportunity as a meaningful reality for themselves or their children, then their stake in the country's future is likely to be eroded.
In this light, we might ask, how does a democracy invest in the future and solve hard problems without a set of shared ideals that bind that community together? What impact does pessimism about fairness and opportunity have on political participation? When political participation declines, what does that mean for what sort of laws are passed, or what sort of justice is served?
These are the kinds of issues that our distinguished panelists will be discussing this afternoon. Before we turn to the panelists, let me note that there will be a Q&A session following the panel discussion. For this part of our program, we would like to particularly encourage students to ask questions on an issue that matters so much to our collective futures. To that end, we will prioritize students in the Q&A session.
Finally, let me introduce our moderator for this discussion, a distinguished academic leader and scholar who has written extensively on the topics of justice and democracy. Please help me to welcome Cornell's 13th president, Elizabeth Garrett.
[APPLAUSE]
ELIZABETH GARRETT: Thank you. Thank you. Welcome. Thank you. Welcome to this discussion of one of the most pressing issues facing us-- growing inequality, and how it affects democratic institutions. While we celebrate a historic event in the life of our university with ceremonies, picnics, and fireworks, we must also affirm that the primary role of a university like Cornell is to work to more deeply understand issues facing society, and help shape responses that will improve the quality of life for people in our state, country, and the world.
Cornell may well lead the country in the rigorous study of inequality and its effect on related challenges, such as sub-optimal political outcomes, misallocation of natural resources, limitations and availability in health care, uneven access to education, and barriers to job creation and mobility. We've assembled a few of our Cornell experts from around the campus to discuss this today.
Inequality is a broad term, comprising many aspects of modern life, although many of the troubling inequalities that we witness with respect to education, natural resources, and the opportunity to participate in the political process, come from income inequality. Income inequality has long plagued the developing world, and it is growing at an alarming pace in long-established economies and democracies.
US income inequality has been increasing since the 1970s, and it has now reached levels not seen since 1928. The wealth gap between the high income group and everyone else in the United States is at a record high. In particular, the share of wealth held by the top 3% rose from 45% in 1989 to 54% in 2013, while the share held by the bottom 90% fell from 33% in 1989 to 25% in 2013.
This is an issue not only for the United States and Western democracies. A World Economic Forum report from last November ranks deepening income inequality as the most consequential trend facing the globe in 2015-- a trend that will shape governance, and define our future. It noted that rising inequality affects all countries around the world. In developed and developing countries alike, the poorest half of the population often controls less than 10% of the wealth.
The responses to growing inequality will be different for each region. The report identifies, as the three most important reactions, access to education, job creation, and tax reform. A country's governance structure will also play a large role. If those lacking jobs, education, and resources are essentially voiceless in the process, their interests are likely to not have an effect on policy.
Although in a democratic system the opportunity to participate and influence policy should be broadly and equally shared, we know from observing our own system that those with broad access to economic wealth have a disproportionate access to-- and therefore influence on-- political outcomes. Democracy does not promise equal outcomes. After all, some have better arguments than others, and that should affect policy and influence policy.
But as long as we believe that access to economic wealthy interests and resources does not reflect the merit of political viewpoints, then the graved influence that wealth plays in our society is problematic. And for developing countries and emerging markets, some moving to democratic systems, underlining inequality shapes the new structures, and impedes the ability of a majority of citizens to counterbalance the greater economic strength of the wealthy elite.
Our panelists today have a body of work that brings new perspective to these issues, and I look forward to talking with them. I'm going to introduce them all briefly now, and then they'll join me on stage. There are larger bios in your materials, and I hope you will consult those.
Robert H. Frank, an economics professor in the Samuel Curtis Johnson Graduate School of Management, has written widely on income inequality, and has argued that rising inequality has created enormous losses and few gains, even for its ostensible beneficiaries. Among the remedies he has proposed is a tax on consumption to level the playing field.
Suzanne Mettler, a professor of government in the College of Arts and Sciences, brings expertise on public policy, political behavior, and civic engagement. In her most recent book, Degrees of Inequality, she analyzes the inequalities found today in American higher education, and she brings her understanding of those issues to her teaching and research.
Eswar Prasad, a professor in the Dyson School of Applied Economics and Management in the College of Agriculture and Life Sciences, brings a global presence to our discussion. He's an expert on emerging markets, monetary policy, and global finance, matters with significant implications for equality, or the lack of it-- topics of his book, Emerging Markets.
Nick Salvatore, a professor in the ILR School and in the American Studies Department of the College of Arts and Sciences, brings expertise in labor relations, law, and history to today's discussion. Among his many scholarly contributions is a fascinating biography of Eugene Debs, a labor leader and presidential candidate on the Socialist ticket in the 19th and late 20th century.
And Gerald Torres, a leading figure in environmental law, federal Indian law, and civil rights law, joined us in 2014 as a professor in the Cornell Law School. His work on the dynamic of equilibrium of power between lawmaking and social movements, which he has termed "demosprudence," is especially relevant to today's discussion, as is his perspective on the relationship between technology and social movements.
So I will ask these five scholars to join me. After we talk a bit, we will open it up to questions, and as Dean Ritter mentioned, we would like to give prime position to students who'd like to join our discussion. With that, can my colleagues join me?
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Wonderful. Thank you for being here on this day. Let's start with a basic question. We need to define our terms. There are lots of different kinds of inequalities-- some more troubling than others, some with ramifications that others do not have. So as we focus in today's discussion about inequality, and particularly how it affects governance, what is the kind of inequality that poses the greatest challenge to democracy and democratic principles? What are the kinds of inequality we should be most concerned with? Eswar, can we start with you?
ESWAR PRASAD: Elizabeth, since we're in celebratory mode, let me start with some good news. If you look around the world, inequality is going down. What do I mean by that? What I mean is that if you think about the major component of inequality, it's inequality across countries in income, wealth, and the fact that many emerging market economies-- countries like China, India, Brazil, have done very well-- has actually shrunk income inequality.
About three decades ago, China's per capita income used to be 2% that of the US-- 1/50 of that of the US. Today, China's per capita income is about 1/7 that of the US-- about 14%. But there, the good news stops. Within every country, inequality has risen very sharply, and even the global picture is clouded by the fact that it's been a very uneven process, with many countries, especially in sub-Saharan Africa and many other conflict-torn countries, doing worse.
But the fundamental issue I think we need to think about is, at what point inequality stops being a sign of a well-functioning, democratic, market-oriented economy, and becomes a pathology. Inequality, as you pointed out, Beth, is a reflection of what happens in terms of distributions of skill, ability, entrepreneurial quality, and, to some extent, luck. And this feeds into wealth inequality as well.
But the difficulty is that when you have a rising tide that doesn't lift all boats, but leaves the small boats either stuck in the mud or barely rising, and the 90-foot yachts are the ones that are rising on the tide, that starts eroding the basic elements that are necessary for a democratic system to function well. And I think that's the problem we see around the world-- not just in the US, but in many emerging market economies as well. That once the democratic process becomes frayed, then it becomes difficult to put in place the policies that are necessary to generate good growth in these economies, balanced growth, and policies that generate both macroeconomic and financial stability.
We saw some results of this during the financial crisis. So I think this is the key point that we face right now. Now, government policies that are intended to help reduce inequality-- and Suzanne, I know, will talk more about this-- sometimes have the opposite effect.
So I think we need to very carefully consider at what point we can think about governments actually helping this process, and at the other extreme being infected by how inequality corrupts the political process, which is especially a problem for the emerging market economies. So I think this interface between the economic outcome and the political outcome, which you've chosen as the topic for our panel, is really a crucial one.
ELIZABETH GARRETT: Bob, I wonder, you've also written a lot about income inequality. Does that lead to the other inequalities? Is it at the base of the issues we're talking about? Or are there other inequalities separate from or that feed into that?
ROBERT FRANK: Well, I think we're concerned about inequalities of various kinds. Obviously wealth inequality probably has more to say about access to voice in the political system than income inequality. Consumption inequality is the kind of inequality I've focused most on, because I think that's the dimension of inequality that's really caused the most trouble for everyday people.
And what's happened, basically, is that we need incentives, for people to want to get up and go to work in the morning. You can't pool all the income, divide it up by the number of people, and give everyone an equal share. If you do that, people will notice quickly that they're getting the same, even though they work hard, as their neighbor who takes time off all day. Sooner or later, everyone's going to want to take time off all day.
So of course-- if you work harder and you produce more, you've got to take home more money. Incentives matter. We all accept that. I don't think that's even an issue on the table. What we know, though, is that beyond a certain degree of inequality, those incentives are very, very weak.
We hear that if we cut the tax rates on the top earners, there'll be an explosion of effort and initiative, and the economy will grow. There's absolutely no evidence to support that. What we've seen, as you pointed out, is that there's been a huge increase in income inequality. And I think the main concern I have about that is just the practical wastefulness of the spending patterns that have emerged as a result of it.
So if you're in the top 1%, or even the top 1/10 of 1%-- that's where all the real income growth has been growing-- you're not a bad person if you spend more on your daughter's wedding, or on the size of your house that you live in. That's what everyone does when they get more money. They spend more on such things. And so the people in the middle, they don't get angry when they see the big mansions of the wealthy. That's a nice thing about the US. There's not a lot of class resentment and envy. They want to see pictures of the mansions and the fancy weddings.
But the people who are just below the top, who travel in many of the same social circles, they attend those weddings. They go to social events at the mansions. That changes their frame of reference that defines what they feel they need. And so they spend more on their daughter's wedding. Now the house, because wedding receptions take place at home, has to have a ballroom, or it's not adequate housing for people in that circle. So the people in the next level down build bigger. Then the level below that, it's dinner parties for 24, not 18-- they build bigger.
And so we've seen a cascade of spending induced by the higher income and spending at the top, so that now the median house in the US, as of 2007, was 2,300 square feet. In 1980, it had been only 1,700 square feet. The median family isn't earnings significantly more in the later years compared to the earlier ones. Why are they spending so much more? Because people like them are spending more. Why are people like them spending more? Because people at the top are spending more, and that's because of the change in the concentration of income.
And you could say, well, just pull yourself together. Don't spend more than you can afford on a house. But here's where the rub comes for the median family. If others are spending enough to buy a 2,300 square-foot house, and you buy only the one you can comfortably afford-- 1,700 square feet, since your income hasn't risen-- then it's your kids that will go to the substandard schools. In every jurisdiction around the world it's the more expensive neighborhoods that are served by the better schools. And so of course parents are going to say, I'll do everything I can to match what others like me are spending on housing.
If you put together a celebration for your daughter's wedding, you want guests to go home thinking it was a special occasion. But "special" is just an inescapably relative term. People at the top are spending millions on their daughters' weddings. Middle class people don't aspire to do that, but the people just below the top are spending more because the people at the top are spending more.
And last year-- the most recent figure I have, 2014-- the average expenditure on weddings in the United States was $31,000. In Manhattan, the average expenditure on weddings was $76,000. In 1980, in inflation-adjusted dollars, it had been only $11,000 nationwide. Does anybody think that the people who got married in 2014 were happier because they spent $31,000 on their weddings, as compared with the couples who were getting married in 1980, spending only-- and $11,000 is a princely sum in the most parts of the world-- only $11,000 on theirs?
This is just pure economic waste. The fact that, in order to achieve basic goals-- send your child to a decent school, have a celebration that seems to announce to your neighbors that you understand what an important occasion it was, that you've got to so stretch your budget in order to achieve those goals-- that's pure economic waste. And the good news is that we could easily do something about it. If we had the will to talk about it, and take solutions under consideration.
ELIZABETH GARRETT: I want to think about some of those, but before I do, Nick, let me turn to you. One of the things I said in my opening remarks is that we haven't seen income inequality like this in the US since 1928. That's, of course, an era you have studied. Do you see differences in income inequality-- or as Bob says, inequality of the ability to consume-- between those two periods?
NICK SALVATORE: I think the difference is really tied to the way in which the gap between the very wealthy and those at the lower end of the economic scale existed. In the period of the 1880s through 1920s, witnessed a growth-- similar to what Bob was talking about, about houses-- of the great mansions of the tycoons, or the great mansions of the industrial leaders. And indeed, that was contrasted with, really, not only dangerous-- profoundly dangerous-- work conditions, but also with terrible housing that most working people who worked for these corporations had to live in.
The result of that was a tension that is not unfamiliar to what-- that different, in some ways, from what we have now-- although it was better organized politically. And that's what I've kind of focused on thinking about.
The political response at the period of the late 19th and early 20th century was organized around two institutions, really. One, the emerging trade union movement, which began in organized form in 1886, and then, about a decade or so later, the emergence of a viable-- politically viable-- I don't mean a majority-- but a politically viable Socialist Party that defined socialism, and I think this is really a very important point, less in terms of The First International of Karl Marx than in terms of broad understandings of American fairness, and a demand that that-- that sense of equality be applied. Because it's the essence of our very democratic traditions.
That's not exactly true historically, I must say. But that was the argument that they made. As a result, the Socialist Party in the turn of the 20th century was able to elect two United States congressmen, many mayors, alderman or city councilmen, state legislatures-- people to the state legislature.
And in 1912, Eugene Debs-- who ran, actually, five times for President of the United States-- but in 1912, he reached the highest level of support-- some 6% over 900,000 voters voted the Socialist Party ticket in a four-way race in that election. He clearly didn't win. It was never going to be a majority.
But what it suggested was that when you take that political emphasis, and then you add to it the activity that went on with Socialist party supporters in both the-- their trade unions and in their churches-- we always tend to think of socialists as always being atheists, or at least secularists. But in point of fact, again, the American condition is very different from the European, and there were many socialists who we're actively involved in churches as well.
So the issue then becomes, when you think about it vis-a-vis today, the issue really becomes one of, well, where is the organized force, where is the organized approach, to dealing with these questions coming from? At one point, people thought that Occupy Wall Street was going to be a major event. But Occupy Wall Street really never lasted-- except I understand it does have an internet presence to this day-- but it never really lasted much beyond Zuccotti Park, and it never actually presented a kind of a program that was possible to even go to a large group of people to try to organize.
The earliest Socialist Party, for all of its faults, had attempted to do that. And to speak in the language of a democratic polity. Of a democratic set of values that needed to be applied to the economic arena. They weren't successful.
And part of the reason they weren't successful is exactly what I think Bob referred to before. Part of the reason was-- is that they never were able to convince a significant portion of the American working class-- or of, indeed, middle class people as well, many of whom were members of the party, but never a significant portion-- that their approach actually held out the hope of fulfillment. Because the themes of individualism, the themes of opportunity, and the sense of the ability to advance, was really a powerful, powerful element-- indeed, even amongst the Socialists themselves. And it's very difficult to understand. Gene Debs was 42 when he became a Socialist.
ELIZABETH GARRETT: So that took up two themes I want to discuss, first with Suzanne, and then with Gerald. Suzanne, let's move to you. Because Bob tells us that most people aren't happy-- we don't think people are happier who are spending $31,000 on a wedding than $11,000. You look at the figures, it doesn't sound like the majority of people are benefiting from policies that are yielding larger income inequality.
Why then, in a democratic system, are we not able to pass laws and policies that, while consistent with inherent inequalities that come out of a capitalist system, ameliorate some of the growing and, I think, negative inequalities of income consumption and wealth? Why hasn't the political system responded, given unhappiness and numbers?
SUZANNE METTLER: Well, the United States is a real outlier today among affluent nations. We have the greatest amount of inequality. And that's not the case when you look at what's called "market inequality," in terms of the differences in people's earnings. There, we're really in the middle of the pack.
The way in which we're different is that we do much less through public policy to try to mitigate those inequalities. And now the plot thickens even further. When it comes to how much of our GDP, what percentage we spend on social welfare spending, again, we're in the middle of the pack. But, in fact, we are spending a lot that's actually upwardly redistributive, rather than for lower and middle income people, through policies and the tax code, which particularly go to the wealthiest people.
And so the question is, why hasn't the United States responded more effectively? Because there are certainly-- Americans truly do feel that there should be equality of opportunity, and that this rising economic inequality is interfering with that. But in the United States, we have a political system created in the late 18th century that's very complex. It was purposely designed to be full of obstacles to quick action. So we have the separation of powers, checks and balances, federalism. So early on, political parties were created to try to allow lawmakers to negotiate all these obstacles, and get things done.
But what's happened over the past few decades is that the political parties have become much more polarized, and they're working today much more as teams very separate from each other. Elections have become very competitive, in terms of who's in control of Congress. And so the parties are working really hard to try to beat the other at each election, and not to give an inch for public policy. So that polarization creates great stalemate and gridlock, and that's one of the big reasons why we're not creating public policies to mitigate inequality better.
But there's a second reason as well. And that is that the more that money is concentrated in some hands, and the more that elections are competitive, there's more money in politics. And we've seen a tremendous growth in the amount that is spent on political campaigns. It's doubled, in real terms-- in terms of how much it costs to win a House race in the United States, how much it takes to win a Senate race-- in just a couple of decades. The amount spent on lobbying has doubled just between 2000 and 2010.
So there's a lot of money in politics. And lawmakers are spending a lot of their time talking to people who are donating money to them, and who are lobbying them. So I think that the voice of ordinary citizens is becoming less well heard, as what could be called plutocracy is really holding the day.
ELIZABETH GARRETT: Certainly money has a great influence, and we can talk more about that, in politics. But in the end, you have to get a majority of the votes. So I think, Gerald, then that turns to thinking about these social movements. Because sure, it is true that those with a lot of wealth can help fund political ads, et cetera, but again, if the message isn't one that resonates with the majority of voters, in the end, what politicians care about is being reelected. And that does take 51%-- well, in a plurality system, maybe not 51%-- but it takes more votes than anybody else has.
Why aren't these movements that are so focused on inequality, that we've seen begin to rise up, whether it's the Occupy movement, Black Lives Matter-- why aren't these movements having more of an effect on policy? Why aren't they the voice of the people that aren't being heard through the expenditure of money? And why can't they take lots of little donations, put them together, and have that kind of influence?
GERALD TORRES: Well, there's a couple things. There are a number of issues that have been raised. One is, the inequality that you've all been talking about really has had an impact, certainly on national politics, and on the way in which parties function. The national parties. And as long as we keep our focus on the way national parties function and national politics evolve, I think we can see the impact of inequality more starkly.
There's actually a lot happening locally. And I think that one of the things-- when I think back to a book that my co-author, Lani Guinier, and I wrote, God, now, 15 years ago-- one of things that we did is, we were looking at social change, and we were kind of frustrated with the way it was happening. So we just spent a couple of years traveling around the country, looking at what was going on in localities.
And we discovered there's a lot going on at the local level that really wasn't rising above the horizon and making national headlines. But people were trying to take action. And so, the same thing's true with climate change-- when people say, you know, Americans aren't interested in taking action on climate, for example. Well, in fact, if you count the number of people who've actually taken action on climate, there's over 83 million people-- through the Cool Cities movement, through Californians on AB 32-- who've actually taken action on climate.
Well, 83 million Americans is actually a lot of Americans. So when people say there are not a lot of Americans doing this, in fact, that's not true. There are. When people say that there are not a lot of Americans trying to take control of things they feel that they can get their arms around, I think that's not true either.
The question is, how do you take these local movements and pull them together to make a social movement? And that's the difficulty. And that's where big money, and the capacity to influence media and to get the national politicians to listen, matters.
One of the impacts of inequality is, it's permitted the privatization of things that we used to think of as public goods. So better schools-- you moved here from California. right? And one of the great slow-moving tragedies of the last two generations in California has been the complete dismantling of what used to be the greatest public school system in the world. Period. That's being replaced by a system of private schools.
You look at the prison system. That's being replaced by-- a public system being replaced by a private system. You look at housing, right? The gated community. The fastest growing housing system in the country is on two levels. One is gated communities, and it's mobile homes. So it's those two ends. So the impact of the inequality is to take things that we used to think of as being properly within the public domain and shifting them into the private domain.
One of the things we have to do is to, A, join smaller public movements together to make them into social movements. And figure out exactly-- I'm not going to say exactly how to do that-- but to move it in that direction, and to talk about what is properly public. And to talk about it unembarrassedly. To talk about the pathologies of inequality in the way that the American political system used to talk about them, and used to be unafraid of confronting them. And I think that's what we have to do.
ELIZABETH GARRETT: Has the Occupy movement, Eswar, in other countries, been more successful at actual political change, as opposed to just elevating an important issue to the public agenda? Because I do think you have to say that Occupy did that, right? Every politician now in both parties in the United States are talking about inequality in some way. One might not agree with how they're talking about it, or what their solutions are, but it's at least on the agenda. But then how does it move into actual policy? And did it have more of an effect in the other countries, where it organized, and was influential for some time?
ESWAR PRASAD: When Donald Trump talks about having to raise taxes on the wealthy, certainly the political discourse has shifted in the US.
[LAUGHTER]
In the rest of the world, not quite. And there is an unfortunate problem that is endemic to many emerging market economies, and, I would argue, takes a different and more institutionalized form in the US, which is corruption. And the problem that many emerging markets face is that this turns out to be a very toxic mix. And many countries are unable to move forward because corruption and inequality essentially become intertwined, so any time that a country wants to undertake certain reforms--
Take my own country, India. There is a lot that India needs to do in order to move forward. And there is general agreement that certain reforms are necessary. But the narrative takes hold in India-- any time there is a reform that is going to be implemented, that the benefits of those reforms are going to go to the politically and economically well-connected-- the elite. And the rest will not benefit from this. And this stops most reforms dead in their tracks.
So the narrative element becomes very important here. China is an interesting counter-example. In February of 2013, the government announced a plan to reduce inequality. Now usually when a government announces a grand plan to reduce inequality, you suspect it's not going to end well. But it turned out that what the Chinese said we will do to reduce inequality is, make the financial system work better, increase the market-oriented nature of the system, put in place a variety of other reforms that are very good for China.
But because they put it in this context, and also coupled it with the fight to reduce corruption, it was much harder to mobilize opposition to those reforms. Because the system as it is structured right now works wonderfully well for people in many of these countries-- for a small set of people. The elite. And I think this is where the risk arises.
If you have, in the US, not corruption, but an institutionalized form of limiting access to the political system, you may have local engagement, but many people may start disengaging from the political process. So you may get your 51%, but you do it through a process of disengagement of many of those who are going to be affected, and by controlling the narrative.
And I think it's an intriguing question that I don't have the answer to. Why, in the US, we have come to this view-- or at least a significant part of the body politic seems to have come to the view-- that redistributive policies are inherently bad. That we don't want to be like Sweden, because they may have a good life, but they're mucking around with the market too much.
And I think we need to understand what is driving this narrative, because narratives, ultimately, are very powerful. And that, with the notion of access to the political system, is, I think, the nexus we need to get a better handle on.
ELIZABETH GARRETT: Gerald, did you want to jump in there?
GERALD TORRES: Yeah, I was going to say, although the-- your point about Sweden is actually interesting, because when they showed Americans a chart about how wealth ought to be distributed, and they show without any identifiers, and they showed the United States, and they show Sweden, Americans choose Sweden. And then, of course, when they put the identifiers on, they said, well, maybe not. Right?
But the distribution curve is actually the one that seems fair to them when they look at it, right? And so what's interesting is, how do you change the conversation so that it-- because I think it's true, within the political discourse of the United States, when you start talking about redistribution, what it means is taking something from somebody who's earned something, right? Somebody who's worked hard for something-- and giving it to somebody who hasn't worked hard for something. That's the narrative of redistribution in the United States. Right?
And I would say, everybody in this room would say, if that's what redistribution means, that's not fair. If you take something from somebody who's worked hard for it, and give it to somebody who hasn't worked hard for it, that's not fair. And if that's what redistribution means, then no one's going to be in favor of it.
And if redistribution mean something different, then let's talk about what it means, in a way-- in political terms, that takes it out of that realm of unfair and that kind of unfairness, and says, you know, redistribution also means building roads that function. Building schools that educate the next generation. Making sure that people who are born without the benefits of wealthy parents have a chance to make themselves well off, and to get the education that they're going to need. Or people who are born disabled aren't hobbled by that disability the rest of their life.
It's a kind of sharing that all of us who are in a community ought to ask yourself, are we willing to share that, to ensure that we reduce the burden on those people who are unfairly burdened? And then we can have a conversation about what it means to be unfairly burdened. As opposed to unfair distribution. And that's a different kind of conversation about redistribution. And we should have that conversation.
I wanted to say something about inequality, too, because Mullainathan-- an economist, Sendhil Mullainathan-- talks about this idea of tunneling. And what scarcity does-- when people are poor, it produces a psychological effect called tunneling. That you start to focus on what's most important, or what you need most. Right? And so if you only have X amount of calories, food becomes the most important thing in your life. And so, even those other things you have to think about, food becomes the thing that dominates your imagination. Right?
If you have limited income, then where you're going to get that next dollar from, or how you're going to make ends meet, becomes the thing that dominates your imagination. So it limits your capacity to be creative. Eliminates a lot of things that might-- that I would say, most of us in this room probably take for granted. And so we've got to think about how that's a kind of disability that inequality creates as well.
ELIZABETH GARRETT: Nick, I saw you--
[APPLAUSE]
NICK SALVATORE: I really appreciate what you said, but I think it's-- I don't see where its legs are. I don't see where its substance is. I think the one time in American history where we approached that was a period roughly between 1932 and early 1970s. I almost-- not almost-- I do think of that period as essentially a long exception to the structure in the political and, if you will, commontarian sensibilities of American public policy.
It was during that period of time, partly driven by the issues of the Depression, that the federal government, under Franklin Roosevelt, took, from the point of view of everything that had preceded, an outlandish position-- that it was the responsibility of the federal government to build those roads. It was the responsibility of the federal government to put those people back to work. It was the responsibility of the federal government to think about welfare, and for people who were looking for work and couldn't find work.
But that period ended, and it ended, I would argue, rather sharply, in the 1970s. I think you saw the beginnings of it with the rise, frankly, of Ronald Reagan in the 1960s. But then I think what happened, most interestingly, with Reagan's then term in office, is that it affected not just Republicans, but it affected Democrats as well.
The policy of Bill Clinton in office, despite all of his references to FDR, was dramatically different from what FDR, in fact, achieved. The culture itself changed dramatically. And so we now have what one might want to think of-- if a traditional American value has to do with opportunity, some sense of equality-- not necessarily everybody being equal in some mathematical way, but some sense of the possibility of rising-- those ideas about the nature of-- the meaning of inequality, and what do you do to help people rise, they became vicious code words in the period after 1980.
And it wasn't just at the Washington level. It was also very deeply embedded in, quote, unquote-- I'll never forget, in 2004, an interview with a couple in Ohio talking about why they were going to vote for George W. Bush. They were holding down between them three jobs and two children. He was a pizza delivery boy-- he was an adult male, but he was a pizza delivery boy. One of them, et cetera. And they were praising the President then. Didn't talk at all about his economics. Talked about his faith. And I think that's--
ELIZABETH GARRETT: I think Suzanne and Bob both want to get in.
SUZANNE METTLER: I agree that since the 1980s we been in an era where the dominant political discourse is largely anti-government. But I think we make a mistake if we assume that that's what ordinary Americans really subscribe to, because in fact, their views are more complicated.
On the one hand, if you ask people broad views about limited government, and taxes, what you will find is that Americans are what we call philosophical conservatives. On these broad abstract questions, they believe that government should be limited, and they believe in individualism, and so on. But then if you ask people about their level of support for all sorts of existing social welfare policies, it turns out that, in fact, people are very supportive of most policies. And in fact, if they're asked a question about, are you willing to pay more taxes so that the benefits are more generous, they will say yes to most of those policies. So they're operational liberals at the same time that they're philosophical conservatives.
And so I think that one of the strategies for moving forward is that we need to talk more about what government actually does that people benefit from. For example, with Social Security, 44% of senior citizens would be in poverty were it not for Social Security. Only about-- less than 10% are. The Earned Income Tax Credit today-- Laura Tach, by the way, here in the PAM department, has written a wonderful new book called, It's Not Like I'm Poor, about how the Earned Income Tax Credit has become a phenomenal anti-poverty policy that lifts a very large number of people, 9.4 million, out of poverty.
And now, more recently, the Affordable Care Act-- it has, in its first five years, actually lifted 17 million people out of poverty. So I think that when people are aware of the difference these things make in the lives of themselves and their families, they do have a different view.
ELIZABETH GARRETT: Bob.
ROBERT FRANK: Yeah, I think, listening to these conversations, there's a real danger that people get discouraged that things can't get better, and I'm glad Suzanne injected that last set of comments. The dynamic does seem threatening. You have people, like the Koch brothers, and Stephen Schwarzman, they get bigger incomes each year, and they're very adamant about starving the government. That they should pay lower taxes, and have less stringent regulations on their enterprises. And so they give very lavishly to fund campaigns.
And then they have been prevailing for the last 30 years-- getting lower tax rates and lighter regulations-- and that gives them more money, so they can give more generously in the next cycle, and so it's very easy to get discouraged, looking at that positive feedback loop and say, how can that ever end? And I always like to mention the late Herb Stein, who was President Nixon's chief economist. He said, "If something cannot go on forever, it will stop."
[LAUGHTER]
You see where this is heading. It has gone on for a long time. I think we're at the point now where there is a narrative ready to coalesce, that the dynamics have gone on in such a way and for such a time that there are no longer even narrowly in the interests of the people who are in the positions like the Koch brothers and Schwarzman. Their interests are very poorly served by the political agenda than they've been financing.
I noticed the logic here in a conversation with a colleague of mine who watches a lot of Fox News. One day we were at lunch. He said, "Do you know about these taxes that President Obama has in store for us?" And then he listed seven or eight new taxes that he thought the president was going to spring on us. I said, no, I hadn't heard about any of those. I knew that the Bush tax cuts on the top earners were slated to expire, but all those other, I hadn't heard. He seemed shocked that I didn't know about them.
I said, do you want to know why I don't know about it? He said, "Yeah." I said, because for people like us, that doesn't matter. He said, "What do you mean?" I said, look-- you're not worried that the government's gonna change tax policy in a way that's going to make you or I less able to get what we need, are you? No, that's not a worry-- he agreed right away. He's the author of a successful textbook, so am I. We save a lot of money. We never are going to spend what we've earned. Of course we're going to get what we need.
Well, what are you worried about, then? You're not going to get what you want? Yeah, that was the problem. Well, what do people like us want? They want nice things-- things that there aren't enough of. A house with a sweeping view of the lake. A nice slip at the marina. Those things are in short supply. How do you get them? You have to outbid other people for them.
And if the government raises taxes on people like us, that means we have less money, yes. But they have less money, too. And so the results of those bidding contests turn out exactly the same as before. The same home sites, the same marina slips, all those things go to the same people as before taxes went up.
And I think the basic cognitive error is that when people think about higher taxes, they think to themselves, that means I'll have less money. And in most situations where you have less money, you really are less able to get what you want. And that's because most situations where you have less money, only you have less money. You got a divorce, you had a job reverse, you had a business failure, a home fire, something like that. You have less money, you really are less able to bid for a house with a view.
But if everybody has less money, that's a totally different state of affairs. And the people who are in Schwarzman's position-- look, maybe he has a Ferrari. If he had to pay more in taxes, maybe he'd be able to afford only a Porsche 911 Turbo. Well, that's almost as good as a Ferrari.
And the money that he and others like him would save if they scaled back a little bit on those purchases would be able to transform those roads we all drive on, which have foot-deep potholes everywhere, into nice, smooth roads. Who's happier? A guy driving a Porsche 911 Turbo on a smooth road? Or a richer guy with more after-tax money to spend who's driving a Ferrari on a pothole-ridden road?
So I think I'm with Gerald. Let's talk about what we can do with the extra money. Make it clearer. We can change a conversation very quickly. Look at the rapidity with which the conversation on same-sex marriage changed. 10 years ago, every region of the country was lopsidedly against that being a permissible notion. Now, every state in the union has a majority saying, well, why shouldn't people be able to marry whomever they please? And so I think if we get the right conversation going--
Nobody knows what to believe. You believe what other people around you believe. And things can tip very quickly. So I think conversations like these are really useful. And we should gather information and go out and talk to people about it. That's what I think we'll eventually get [INAUDIBLE].
GRETCHEN RITTER: Conversations. On the note of conversation, I'd love to open up the floor. So we are going to have microphones in both aisles here, and we'll have a microphone up top, and I will rotate among the microphones as we ask questions.
ELIZABETH GARRETT: And as we wait for people there to come in, we'll have Eswar and then Gerald, real quickly.
ESWAR PRASAD: I admire your optimism, but if you think about the highway example that you just provided. Our infrastructure here in this country is crumbling in many parts. And yet there is a highway funding infrastructure bill that is going nowhere. It's something that we should all be able to agree on.
I mean, the car aficionados may take strong exception to your equating a Ferrari with a Porsche, but the reality remains that there are very basic elements that are necessary to make us all better. And we don't seem to be able to move forward.
SUZANNE METTLER: This is precisely because of the kind of polarization and gridlock we have. It's really striking that, as recently as the 1980s and early 1990s, passing the highway bill was sort of bread and butter politics. It's what Congress did. And now, in recent years, it's become, it seems, impossible for us to have a long-term highway bill. We keep having stopgap measures of three months at a time.
GERALD TORRES: Let me tell you things-- two things about a red state. OK? I moved up here from a red state. OK? A red state. And Texas is generally considered a red state.
GRETCHEN RITTER: Except for Austin.
GERALD TORRES: Texas went from 49 to fourth in math education in the country. How did it do that? Did kids in Texas suddenly become smarter because they put something in the water? No. You know the way they did it? They did it because they said, we're going to reward teachers by raising the low score in the classes. We're not going to reward you by raising the top score. We're going to reward you by raising the low score.
So by rewarding teachers for raising the low scores in the class, teachers suddenly had a different incentive structure. And suddenly, the kids got smarter. Right?
On windy days, Texas gets 18% of its electricity from wind. This is an oil and gas state, right? It gets 18% of its electricity from wind. How does it do that? Did a market for wind just develop? No. They developed portfolios for the utilities that require that they buy a certain percentage of their electricity from renewable sources. They have a unified grid over the whole state. They got are really windy part of the state in West Texas, and they created a market for wind.
Now, they don't talk about this when they're running for president.
[LAUGHTER]
Because that would be government interference with markets. Right? But in fact, they did it.
GRETCHEN RITTER: OK. We're going to start with the young man right here.
AUDIENCE: Thank you. My name is Doc Hanson. I'm a junior in the Applied Economics and Management School. And my question really comes from class. We were talking about this idea of "slacktivism." And I don't know if you've heard of the term, but basically it's the idea that students, or millennials, have this concept of, oh, we want a Facebook "like." We want to be seen as being active. However, we will pay the less or do the least we can in order to get that.
And so I see we'll like a page on Facebook because we believe in the cause, but we won't go and knock on a door. Which, I think, comes more from what we see in history. So my question to you, really, is, how do we take this message that you've given us today, that's really, I think, opened a lot of our eyes, and turn it into action? How can we become active citizens, and not slacktivators?
ELIZABETH GARRETT: I'll try a quick answer. Then I'll turn it over to any of my colleagues. I don't actually see what you've just described in my students. What I actually see is a disengagement with government. I see that they actually are very active in causes-- causes close to home, sometimes causes around the world. They do want to be engaged. They do actually knock on doors, and chalk, and do other things.
[LAUGHTER]
That's really good. And they get involved in NGOs. And they think about their lives in terms of social justice. And they think about their careers in terms of joining, maybe, an employer who's a traditional business, but also has a sense that there's more than just shareholder return, or responding to the next quarter.
What I don't see them doing is saying I'm going to run for Congress. What I don't see them doing is, I'm going to engage in institutional litigation to change policy. I think they've become-- and it's not the same corruption, Eswar, you were talking about in developing countries-- but there is a sense that there is a corruption to being involved in the political system. That it's, that's not what people like us do. That's tawdry. Look at what happens. Look at how they talk. Look at who they are. We're not going to do that.
And that, I think, means that in the end, you won't have the effect you want to have. So what I try to encourage students to do is to be involved in politics. You cannot let it be the domain of other people. It has to be your domain. And so that's what I-- I don't see slacktivism at all. I actually see stuff I very much admire in students. But I don't see them turning it into policy, and focusing their attention at the right places.
[APPLAUSE]
GRETCHEN RITTER: I'm going to call on the young woman over here.
AUDIENCE: Hi. My name is Millie Kastenbaum. I'm a senior government major in the College of Arts and Sciences. So all of you talk a lot about the inequality side of today's panel, touching upon everything from the prison system to economic inequality. My question addresses the democracy side, which is that, given all of this inequality in our country, can we truly call our government a democracy? And if not, how can we remedy this inequality, so that we have a truly representative government?
SUZANNE METTLER: I'll take that. It's a fabulous question. I think we've been focusing a lot on economic-- socioeconomic inequality and the ramifications of that. But you're absolutely right. We have the idea in the United States-- most Americans, if they're asked, will say they believe in political equality, in that each person is supposed to be equal before the law. And everyone is supposed to have an equal voice, an equal chance, at having their voice heard by elected officials.
If some people are able to put much more money into elections than others, and if some people are able to have the ear of lawmakers much more than others, what happens to democracy? The concern is that it turns into something that's more like an oligarchy, and I think that's very much what's at stake.
ELIZABETH GARRETT: Gerald?
[APPLAUSE]
GERALD TORRES: In addition, I think we need to stay focused on eliminating barriers to voting.
[APPLAUSE]
Without wanting to sound like a paid political advertisement, I'd go look at advancementproject.org, who does voter protection work. They're a civil rights group that does voter protection work, and has done most of the voter protection litigation over the last two presidential cycles, because there's a lot of creativity afoot on limiting the vote out there, and we need to focus on how to make the vote available to everyone who deserves to vote.
[APPLAUSE]
ELIZABETH GARRETT: Great. And I'm gonna call on [INAUDIBLE].
ROBERT FRANK: Following on Suzanne's comment, the Citizens United decision recently declared that corporations were persons and could fund political campaigns virtually without limit. I don't think there are very many political scientists around the world who would view that decision as boding well for an effective democracy. I think we need to really think hard about what steps we might take to undo that decision.
ELIZABETH GARRETT: Well, and if I could chime in there. You know, Citizens United is often thought of as the corporate speech case, and it certainly said that. The other thing that it said that I think you've got to really focus in on is, it said explicitly that independent expenditures in political campaigns cannot corrupt a political campaign.
Because the Supreme Court looks at corruption-- to go back to Eswar, this is corruption in our democracy-- as only being about bribery. As about giving money to a politician in exchange for a particular action. Not even access, but a particular action. And so if it's independent, then how can it possibly corrupt? There wasn't that quid pro quo.
Of course, the notion that someone spent $100 million in favor of your campaign is not going to somehow engender a sense of gratitude from you-- you begin to wonder where the Supreme Court justices who wrote that opinion are hanging out. Who do they know, if they think that's true?
[APPLAUSE]
So to go back to the notion of discourse, I think one of the things we have to do is to change how we think about corruption in the legal sense, which is the governmental interest that allows us to regulate speech. Speech can be regulated. Speech has to be regulated in the narrowest possible way, to serve a compelling state interest.
The narrative must change, so that the compelling state interest just isn't bribery, but it is a political system where people do not have equality of opportunity. And if you change the narrative, then-- and perhaps change some personnel-- then you change the outcomes of the Supreme Court.
GRETCHEN RITTER: At the mike on the top.
AUDIENCE: Hi. My name is Raye. I'm a freshman in the College of Architecture, Art, and Planning. And my question is, you talked a lot about inequality in terms of economic and political engagement. And in a country that has such extreme racial divisions, especially in terms of spatial equality-- where people can live-- which then leads to educational equality in our public schools, if we can really address income inequality while ignoring that factor? Or if you think that politicization of marginalized groups will come as a result of increased income and political equality.
ELIZABETH GARRETT: The question was, given the inequalities that are inherent in racial inequality, if we just look at inequality of income, are we then ignoring a different kind of inequality, or do they move hand-in-hand? Interestingly, it's a sort of converse of some of the things that we've heard-- that as a country, we focus too much on racial inequalities, and not enough of inequalities of class. Nick, do you have-- because you've spent a lot of time--
NICK SALVATORE: I think the two really have to be integrated in a response, or in a movement. Because you're absolutely right. The emphasis on economic inequality certainly includes many people who are people of color. But there's another dimension in the American tradition of racism and racial segregation-- I don't mean just physically, but as a mode-- that goes well beyond just that.
As well-to-do African Americans could tell you time and time again, the fact that they're wealthy, or wearing good clothes, or driving a nice car, not only does it necessarily mean anything-- in fact, may even trigger reactions on the part of others because of the perceived difference that they shouldn't be having those things because they're black and not white, and that kind of stuff.
So I think that the two are really deeply intertwined. And I just think that, you know, this is an hour's talk from us, and a half hour talk with you, so I think that's what happened today. But I think that they should be actually addressed. Integrated, I should say.
GERALD TORRES: It's hard to talk about inequality and democracy and not talk about race. You're talking about the exceptional moment. Remember, in the 30s, right, one of the slogan was "no fair employment until full employment."
NICK SALVATORE: That's correct.
GERALD TORRES: Right? And there's no question about what that meant. But they weren't going to talk about integrating the unions until the unions were recognized and there was full employment for union members. So it was Richard Nixon's southern strategy, the Philadelphia plan, and Johnson's recognition that he was giving away the South to the Republican Party with the Civil Rights Act, that race is a deep fissure in American culture. And we need to confront that, we need to talk about that, and we need to be frank about it. And it is one of the ways in which inequality continues to be manifest.
When I talked about one of the tragedies that we witnessed in California, I was-- I'm sitting here today because of the way California public schools were funded. I was able to go to public school in California and get a great education. That ought to be a promise that you could make to any kid in America. Period.
[APPLAUSE]
Now, not to say you couldn't-- if you want to send your kids to private school, which, I confess, I did send my children to private school-- you can do that, too. But if you send them to public school, they ought to be able to get a great education. And it seems to me that's not too much to ask, regardless of the race, regardless of class.
NICK SALVATORE: If I can just, for a second-- that's what actually does depress me-- and somebody was worried about the depressing tone-- but I, too, had public education. City University in New York, Berkeley-- I wouldn't be here without that. And that infrastructure has been eaten away. So it certainly affects people in poverty. It affects people of color. But also it affects white working class kids--
GERALD TORRES: Absolutely.
NICK SALVATORE: --who stumble across almost a free education. $30 a semester. And end up someplace else.
GRETCHEN RITTER: We're gonna call on this gentlewoman right here.
AUDIENCE: Hello. I'm Kavitha. I'm a senior in the College of Arts and Sciences, double majoring in government and psychology. And thank you all so much for speaking with us. This is something that I've learned over my time at Cornell, is that elite colleges like Cornell University seem to perpetuate the elite class in America and around the world. Will Deresiewicz's book Excellent Sheep, like, nicely summarized that, and his more controversial article titled "Don't Send Your Kid to the Ivy League."
And I definitely have seen that around campus a lot-- that it's just a perpetuation, more or less, of an existing class in America. And I was wondering, what steps is Cornell University taking, and what steps can we as students take, to break down this inequality in terms of elite education in America?
ELIZABETH GARRETT: Suzanne, you want to talk about-- You've written quite a bit about higher education, and actually how some of the schools who have more resources have actually been able to offer it, as Cornell does, to students of first generation, and to all classes and income groups, and where the real challenges may lie in the areas the students discussed.
SUZANNE METTLER: That's right. Yeah, I could speak about it broadly, and then some of you might want to weigh in about Cornell in particular. Cornell, in its beginnings, through-- as being a land-grant institution, part of the Morrill Act-- these are institutions that, around the country, began to broaden access to people a little bit further across the income spectrum. In the middle of the 20th century we did much more of this through federal policies-- from the G I Bill, through Pell Grants, more and more people across the income spectrum were going to college.
And since the 1980s, and particularly in the past 20 years, things have really slowed down. On the one hand, more young people than ever go to college. But graduation rates overall-- and here I'm not talking about Cornell, but nationwide-- have been poor for people who are below median income. And the reason why is because they can't afford to stay enrolled, and to graduate. And so those graduation rates have barely increased, below median income, since the 1970s.
And so, you know, what's happened-- and the answer is a little different depending upon what sector of higher education we're talking about. But a Pell Grant, for example, used to cover-- back in the 1970s, when they were created-- it covered 80% of the cost of tuition, room, board, and fees at the average public university. And now it's down to just over 33%.
So a place like Cornell, which cares very much about having access for students, needs to dig deeper to try to have financial aid that's really enabling more students from across the income spectrum to go here, and to stay enrolled. And there are certainly places in the country that are doing a much better job. There was a nice report in The New York Times yesterday that shows that while the University of California has much less in resources than it used to, it still has the highest graduation rates of low income students and so on in the country.
But I think that there's a lot to be looked at here in terms of how much public policy helps, and then what institutions could do as well, to try to level the playing field.
ELIZABETH GARRETT: Bob, you've talked a lot about education.
ROBERT FRANK: Yeah, I think what Suzanne says is at the heart of the problem. We like to celebrate the idea that the doors are open, and children from any part of the socioeconomic distribution can get a good education and make it if they're willing to work hard. But a recent study I just saw had families from the bottom third of the income distribution, their children who scored in the top quartile in math were less likely to graduate from college than the children of families in the top third of the income distribution whose children had scored in the bottom quartile in math. In the one case, 30%, in the other case, 29%.
That's just a number that's not consistent with any credible claim that we're a society of equal opportunity. And again, it's money that we need in order to make up a big chunk of the gap. The funding for tuition assistance, about 80% of the rise in out-of-pocket costs for students has been attributed, in another study, to reductions in state support for higher education. And we're the richest country, still, on Earth. We're spending a lot on weddings, a lot on mansions, a lot on fancy cars.
[LAUGHTER]
We could spend less on those things, if people had an incentive to spend less on them. We could divert those dollars into things that I think we would all, at the end of the day, feel wow-- that was better, that we spent our money in those other ways. So it's a conversation that I think could lead to that, but it won't lead to that if we don't have the conversation.
ELIZABETH GARRETT: And it's something that, as Cornell's president, I think a lot about. I will say, I went to public schools for my education-- the University of Oklahoma and the University of Virginia-- at a time when that was very affordable, particularly as an in-state student. And one of the things that has attracted me the most about Cornell is its deep commitment to egalitarianism and its public mission. And because of that, Cornell devotes a great deal of its own resources to making sure that any student that is admitted can afford our education.
So if you actually look, in real dollars, inflation-adjusted dollars, those who receive aid at Cornell are paying less now than they did in 2008. And that's because of decisions made by my predecessors to devote a great deal of the unrestricted resources of this university, particularly, and as Suzanne said, as the federal government's commitment has been going down. As the Pell Grants have stayed at the same nominally, or sometimes reduced, but have not stayed the same in terms of real terms.
So it's something we really have to look at. We have to continue to maintain our commitment. We have to ask more of our very generous supporters, who endow scholarships, and who bring money to us. I think it's one of the reasons it's important for us to be welcome to people of all races, economic backgrounds, first generation college-goers, who I think are an enormously important part of Cornell and public education. For them, the opportunity of America is the opportunity of education.
But I also think we have to understand that anybody in higher education is only one part of the puzzle. And that goes back, to me, to equality of opportunity for education at K through 12. Because we are never going to admit somebody to Cornell who can't succeed and graduate from Cornell. Suzanne's book, that I just read, Degrees of Inequality, which is terrific, makes the point that others have also made, that when you think about the debt crisis in undergraduate, it is people who are graduating with tremendous amounts of debt. Much more than our average debt, which is around $28,000 in the undergraduate, for those who have debt. Less than $10,000 for all students.
But who have $100,000 in debt, and do not have a degree. Right? That is a terrible outcome. And that is an outcome that is in part the fault of the institution that does not work to graduate the students. Our students graduate. But it is also the fault of a system that does not prepare students to succeed in this milieu.
So I think all of us have to work together to ensure that the promise of America, which, for me, has always been the promise of education, is a real promise for all Americans.
AUDIENCE: Thank you.
[APPLAUSE]
GRETCHEN RITTER: I think we have time for one last question, if we want to do that.
GERALD TORRES: I just want to say something that makes me-- it'll make me seem kind of like a sap, and I apologize for it. But one of the things I loved about coming to the Cornell Law School is that its first graduating class, so it's in the DNA, contained a student who was born a slave. And so that told me, this school's committed to it in its bones. And I think I'm committed to it, too.
[APPLAUSE]
GRETCHEN RITTER: Last question over here.
AUDIENCE: Hi. My name's Alison Considine, and I'm a junior in the ILR School. I'm also a member of the Cornell Organization for Labor Action, which is a student labor solidarity group on campus. But before I ask my question, we wanted to congratulate you on your inauguration, and deliver this card to you, after I ask my question.
ELIZABETH GARRETT: Thank you. That's great.
AUDIENCE: But my question is, in your article in the Cornell Chronicle, you said that staff are very important to our academic enterprise, but their role is often under the radar screen or taken for granted. In the face of reports that workers on our medical campus in Qatar are facing exploitation and abuse, what are you going to do to remedy this situation, and ensure that the promises of democracy and equality on our campus are occurring at all of our campuses?
ELIZABETH GARRETT: Let me answer that briefly, but I also want to turn to Eswar, because I'm glad you brought this up, because I also wanted to think about the larger question, which is, what can of those of us in a country like the United States do to affect labor conditions in other countries? Which I think is a sort of interesting larger question.
With respect to your question, and I will certainly provide a longer answer to you. I appreciate you guys coming-- I was in office, but I appreciate you coming by and sharing with me your views. We take very seriously the health and well being and the safety of our staff, no matter where they work for us. And I am confident that we are doing-- we are treating our staff in Qatar in the way that we treat our staff here, and that we work very hard to have labor conditions of which we can be proud, no matter where we are.
There are always difficult questions that one faces when one goes into the world that don't have conditions like we do, generally. But we, as Cornell, have particular principles that we uphold, and we will continue to uphold them.
But I think the more interesting question, more generally and broadly, is, what do we think about-- how do we think about-- if we are concerned about the conditions of workers throughout the world, how do we go about effecting that change here to change things in Qatar, in Bangladesh, other places where we know that there are labor conditions that we would not expect to find here?
ESWAR PRASAD: Yeah, the simple and convenient answer at one level is that we might do, through our direct intervention, approaches that ensure that those countries have the same standards as ours. But you know that I'm deeply conflicted on this issue. Because when I think about countries like India, for instance-- there are terrible conditions there, if you take something like child labor. And it's terrible-- I have kids of my own, and I see kids working in these grimy conditions-- it's awful.
But on the other hand, when you have these very well-intentioned policies from the outside that are imposed on a country and you end up having these kids essentially losing jobs because the factory is shut down because of the high conditions, where do the kids go? There is no real alternative for them. So I really don't know.
I think this is a problem we have to grapple with, but we have to grapple with it without these rather simplistic, high-minded solutions that, from our perspective, might say we are doing the right thing-- we are holding ourselves and the rest of the world to high standards. But I fear that the situation is a lot more complex. So what is a broader answer?
I mean, what we need to support is broader reforms in these countries, and trying to deal with the governance problems in these countries, I think, is crucial. The corruption is an important part of it. And America has led by example, in terms of its democratic process, in terms of the rule of law, and these are the things these countries really need. So I think if there was anything we could do to make conditions in these countries better, it's not necessarily by sticking to high-minded principles, which I think we need to, but sometimes can have unintended adverse consequences on those we are trying to help.
But trying to set better standards for what really matters-- governance, institutions, financial markets-- on all of those, America is by no means perfect. But I think we have attained certain good standards, and there are lessons we have learned, both by doing the right thing and through our mistakes, that I think would be helpful. Not in the approach of saying we're going to lecture to the rest of the world. But there is something we have to offer, and I think this country has given many people a lot, and I think can lead the world in that positive light.
ELIZABETH GARRETT: Well, I know there are more questions, but we have to be respectful of your time. I think that's a nice way to end. Because what all of these discussions always bring up is how complex the problems themselves are, and figuring out the right solutions are. A complexity true for our own country, made even more complex when you think about the divergences around the world.
And the way I think we get traction on it is, as an academic community, talking seriously about these issues, listening to each other, respectfully, as we did today. Now you know what faculty talk about when we hang out. This is sort of how we talk to each other, and how we enjoyed-- I want to thank, on behalf of my panel, Dean Gretchen Ritter for having organized this panel, and ending our inaugural events on an academic note. Thank you.
[APPLAUSE]

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Growing global inequality and its effect on democracy is one of the most pressing issues facing the world today. This panel, moderated by President Elizabeth Garrett, brings together new perspectives on the challenges that inequality presents to democratic governance. Held September 18, 2015 in honor of Elizabeth Garrett as part of her inauguration as Cornell's 13th president.

Faculty panelists:

Robert H. Frank, the Henrietta Johnson Louis Professor of Management and Professor of Economics;

Suzanne Mettler, the Clinton Rossiter Professor of American Institutions;